4.90.10  Statute Control Procedures

Manual Transmittal

December 06, 2013

Purpose

(1) This transmits a table of contents and text for IRM Part 4, Examining Process, Chapter 90, Federal State and Local Governments, Section 10, Statute Control Procedures.

Material Changes

(1) Minor editorial changes made throughout Section 10.

(2) Field Operations Manager position is inserted in several places.

(3) 4.90.10.1 Overview expanded to include specific extension forms.

(4) 4.90.10.3.2 reflects managerial notification changes.

(5) 4.90.10.3.3 reflects managerial notification changes.

(6) 4.90.10.5.3 The hierarchy of Signatures Required changed.

(7) 4.90.10.5.4 Form 3999 distribution list changed.

Effect on Other Documents

This section supersedes IRM 4.90.10, Statute Control Procedures, dated October 1, 2010.

Audience

This section contains instruction and guidance for all Federal State and Local Government compliance employees when dealing with statute control procedures as they apply to examinations.

Effective Date

(12-06-2013)

Paul A. Marmolejo
Director, Federal State and Local Governments

4.90.10.1  (12-06-2013)
Overview

  1. The purpose of this document is to establish uniform procedures within FSLG for the control of statutes. Additional procedures may be implemented at the discretion of the Field Managers.

  2. Further guidance can be found in IRM 25.6.23, Examination Process - Assessment Statute of Limitations Controls

  3. The period of extension of a statute should not be longer than is necessary to complete the examination and permit administrative closing of the case.

  4. Use the proper extension form to extend the statutory period:

    • Form SS-10, Consent to Extend the Time to Assess Employment Taxes, is used to extend the assessment statute for FICA, FUTA, RRTA, FITW, and BWH taxes. See IRM 4.23.14.4.

    • Form 872, Consent to Extend the Time to Assess Tax, is used to extend the period of limitations for Form 1042. See IRM 4.23.14.8.

    • Form 872-B, Consent to Extend the Time to Assess Miscellaneous Excise Taxes, is used to extend the statute of limitations on IRC 6721 and 6722 penalties. See IRM 4.23.14.11.

  5. Refer to IRM 4.23.14 Statute Control and Extension for detailed guidance.

4.90.10.2  (10-01-2010)
Responsibilities and Procedures

  1. Statute controls are required for all tax returns and/or information returns under examination.

  2. To maintain proper statute controls, the Field Manager or person designated by the Field Manager will, at least monthly, review and reconcile AIMS Table 4.0, Returns with Statute Date Pending, and RCCMS. As a result of the review, the Field Manager or designee must take action to:

    • Ensure the statute of expiration information is accurate, including proper determination of Assessment Statute Expiration Date (ASED) or any alpha codes used or to be used;

    • Close the case promptly unless there is a compelling reason to keep it open;

    • Secure a consent to extend the statutory period for assessment if needed; and

    • Take other appropriate actions to protect the government’s interest.

  3. If the Specialist cannot expeditiously conclude the examination within 270 days of the statute expiring, the Specialist and the Field Manager may decide to execute a statute extension, subject to the consent of the taxpayer. Every attempt should be made to complete the case before a statute extension becomes necessary.

  4. Effective statute control procedures are a result of a collaborative effort. Each Field Manager, Management Assistant/Group Clerk, and Field Specialist play an important role in monitoring the group’s statute control process. It is imperative that the Field Specialist and Manager exercise due diligence in ensuring that valid statute extensions are secured and executed.

4.90.10.2.1  (12-06-2013)
Responsibility of Field Managers

  1. Field Managers have primary responsibility for initiating, monitoring and maintaining statute controls using Reporting Compliance Case Management System (RCCMS) for returns assigned to Specialists and returns in the group's unassigned inventory. All cases in which issues are being considered must be controlled on RCCMS/AIMS (Audit Inventory Management System), and the statute of limitations must be protected.

  2. Field Managers are responsible for ensuring that all employees within their jurisdiction:

    • understand the law pertaining to statutes commensurate with the employee's assigned responsibilities;

    • maintain required statute controls; and

    • make timely assessments of tax and penalties.

  3. At a minimum, Field Managers will complete a monthly review of RCCMS for the status of those returns for which the normal period of limitations will expire within 270 days. Additionally, Field Managers should consider any delinquent return situations that may warrant statute control consideration.

  4. The Field Manager (or designee) will ensure that the RCCMS statute listings are being generated and provided to Field Specialists for response on all returns where the normal statute of limitations will expire within 365 days. The Field Manager (or designee) should also ensure that Field Specialists respond appropriately to the request for information. The Field Manager (or designee) is also responsible for reviewing the comments made by the Field Specialists for accuracy. This may require reviewing the response provided in the prior month to determine that the case is progressing according to plan.

  5. Upon receipt of a completed Form 895, Notice of Statute Expiration, the Field Manager will review the tax return, Form 895, and BMFOLT or TXMOD to verify the accuracy of the statute date. Once the statute date has been verified, the Field Manager will initial the expiration date on Form 895 to indicate he/she has verified the accuracy of the form. At this time the Field Manager will provide any additional instructions to the Specialist. The Field Manager will retain a copy of the Form 895, which will be placed in a statute control file according to the month of the date of expiration. The original will be attached to the cover of any paper case file folder and a copy will be posted electronically to the RCCMS record. The statute control file should be checked at least monthly and, where required, the Specialist should secure consents extending the statute and update RCCMS/AIMS as appropriate.

  6. If a decision is made not to extend the statutory period, Form 895 will be appropriately noted and initialed by the Specialist and the Field Manager. The "Remarks" section will be used to indicate why an extension of the statutory period is unnecessary. Appropriate notes should be made on both the original, Field Manager’s copy, and electronic copy of Form 895 for any follow-up action that is taken, such as the execution of an extension of the statutory period.

  7. The Field Manager (or designee) will be responsible for completion of Form 895 for any cases in the group's unassigned inventory. When the statute of limitation for any cases in the group's unassigned inventory is less than 365 days, then the Field Manager should consider surveying the case as out-of-cycle to avoid the necessity for completing a Form 895 and other short statute procedures.

  8. Upon transfer of returns, within or outside of the group, all copies of Form 895 will accompany the return file.

  9. The Field Manager will attempt to ensure that agreed cases have at least 180 days remaining on the statute of limitations, and unagreed cases have 270 days remaining, when they are closed from the group. All cases submitted for technical advice must have at least 365 days remaining on the statute of limitations before being sent to CPM for mandatory review processing. A memo will accompany the case file providing an explanation by the Field Manager of the reasons the case was submitted with less time remaining than indicated in the above guidelines.

  10. Any case with less than 8 months (240 days) remaining on the statutory period will be placed in a red folder . If the statute expiration is subsequently extended to a period greater than 8 months, the case should be removed from the red folder.

  11. For any case being transferred (between locations/areas, closed to Processing, or closed to CPM) with less than 180 days remaining on the statute, the Field Manager must notify the receiving manager of the transfer. This should be done with the knowledge and concurrence of both Managers. The Field Manager will hand carry, use overnight mail, or use an express delivery service to ship the case to the receiving group. The Field Manager will follow up to ensure the case is received timely.

  12. Field Managers are responsible for complying with the provisions of IRM 25.6.23.

4.90.10.2.2  (12-06-2013)
Responsibility of Field Specialist

  1. The Specialist is responsible for complying with the provisions of IRM 25.6.23. He/she is also responsible for making timely notification to the Field Manager at any time these provisions are not being followed. Specialists should always be aware that the person in possession of the return is ultimately responsible for the protection of the statute of limitations. When it is necessary to protect the government's interest, Specialists are also responsible for the protection of the statute of limitations for open years of related entities and subsequent years not open for the entity under examination.

  2. Specialists are responsible for identifying the correct statute date for all filed returns and delinquent returns in their inventory, including all primary and related returns covered by the scope and depth of the examinations being conducted.

  3. Specialists are responsible for verifying the correctness of the statute of limitations date shown on RCCMS/AIMS for each return in their inventory. When the Specialist receives a statute listing, they are required to provide information for the returns on their list to the Management Assistant and Field Manager by the due date. The type of closure expected (i.e. agreed, unagreed, or no change) should be provided for all returns shown on the listing. Additionally, each return must contain the following annotations as applicable:

    1. Updated/corrected statute date;

    2. Date consent to extend the statute was solicited;

    3. Date case was submitted to the Field Manager for closure;

    4. Estimated case completion date (if agreed or no change closure expected); or

    5. Estimated date 30-day letter will be submitted to Field Manager for review (if unagreed closure expected).

  4. The Specialist completes Form 895 for any return when the normal statute of limitation date is expiring within 270 days. Any updates or changes to the statute of limitations must be annotated on Form 895. The Field Manager is required to sign off on all Forms 895, and the Field Manager’s approval is required for all statute of limitations updates. Prior to closing the case as a paper file, the Specialist will print out Form 895.

    Note:

    Complete instructions for preparation of Form 895 may be found in IRM 25.6.23.7.

  5. If the taxpayer does not consent to extend the statute, the examiner will initiate action, as necessary, to issue a statutory notice of deficiency or initiate other means to assess tax deficiencies before the statute expires.

  6. If it is determined that the statute should be updated from a live statute to an alpha code statute, a memo for the file must be prepared, with a detailed explanation of the reason for not extending the statute. The Field Manager will sign off on the memo and forward it to the Field Operations Manager for approval. This should take place with no less than 210 days remaining on the statute. After the applicable level of management approval has been obtained not to extend the statute, the RCCMS activity should be updated with the applicable alpha code. All actions should be notated in the Activity Record.

  7. The Specialist should discuss with his or her Field Manager the need to establish a prior year return. A prior year return is defined as a return for any year before the year under examination. Compelling reasons should include substantial tax liabilities or issues relating to abuse. The approval or disapproval must be documented in the Activity Record. Within five workdays of securing managerial approval, the Specialist should establish the prior year returns on RCCMS, which will establish AIMS controls. The Specialist should also prepare Form 895, Notice of Statute Expiration, (if applicable).

    Note:

    These procedures should not prevent Specialists from securing delinquent returns for which the statute of limitations has not begun to run. However, the same approval is still required on these types of returns.

4.90.10.2.3  (10-01-2010)
Responsibility of Management Assistant

  1. The Management Assistant will pull a statute listing from RCCMS, by employee, of all returns with statute of limitations’s expiring in 365 days or less. The statute listing will be pulled every month on or before the WebETS cycle ending date. The Management Assistant will distribute the listing via secured E-mail to each employee by the end of the WebETS cycle ending date. The Field Manager should be copied on this E-mail. The E-mail will have a response date of two weeks or less. The Specialist’s annotated statute listing should be returned to both the Field Manager and the Management Assistant via secured E-mail.

4.90.10.2.4  (10-01-2010)
Compliance and Program Management (CPM)

  1. The Manager, CPM and CPM staff are responsible for maintaining statute control for returns under their jurisdiction. This will be accomplished by the following procedures:

    1. The Manager, CPM or a designated reviewer will verify the statute of limitation date. All cases received with less than 180 days on agreed cases, or 270 days on unagreed cases, will be assigned immediately upon receipt. No technical advice case will be accepted with less than one year left on the statute of limitations unless other arrangements are made with the Manager, CPM.

    2. The Manager, CPM (or designee) will monitor short statute cases at least monthly and, when required, the reviewers will secure consents and update RCCMS/AIMS.

    3. CPM personnel assigned and in possession of a return are responsible for complying with the provisions of IRM 25.6.23. The person to whom a return is assigned is also responsible for making timely notification to his/her manager at any time those provisions are not being met.

4.90.10.3  (07-31-2009)
Short Statute Case Procedures

  1. To avoid undue hardship on the receiving units and limiting proper consideration of issues and procedures, the following procedures should be used for short statute cases.

  2. Short statute cases are agreed cases with less than 180 days or unagreed cases with less than 270 days remaining on the statute of limitations when they are closed from the group.

4.90.10.3.1  (12-06-2013)
All Cases

  1. All paper files received in CPM must include:

    • Current (no more than 30 days old) AMDISA and INOLES prints;

    • Proper updates to AIMS through RCCMS for statuses 20 (Review), 56 (EO Only), or 51 (Closing Units);

    • Proper statute documentation, including completed and signed Form 895 and red folders as applicable;

    • The statute of limitations date clearly documented on Form 3210, when there is a short statute, and

    • Form 3198-A, TE/GE Special Handling Notice, placed on the outside of the case folder.

  2. Short statute cases received in CPM without prior notification (explained below), without indication of timely solicitation of a statute extension, or with unexplained delays in processing, may be returned to the group via Form 3990, Reviewer's Report. A copy must be forwarded to the Field Operations Manager. CPM will provide assistance with these cases for technical and procedural guidance; however, the control of the case will remain with the group.

  3. When closing cases on RCCMS to CPM and from CPM to the closing unit, all RCCMS records must clearly indicate the statute of limitations in "comments" in the closing dialog box for the purpose of alerting the receiver that this case requires special handling.

4.90.10.3.2  (12-06-2013)
Unagreed and Appeals Cases

  1. Unagreed cases, both those going to Appeals and those not going to Appeals, must have at least 270 days remaining on the statute of limitations when closed from the group to CPM.

  2. Unagreed cases not going to Appeals, with less than 270 but at least 180 days remaining on the statute of limitations, must contain prior written notification, such as an E-mail message, from the Field Manager to the Manager, CPM regarding the pending submission of the case and proof of timely solicitation of the consent to extend the statute of limitations. The proof of timely submission of consent to extend the statute of limitations must be documented on the activity record (Form 9984).

  3. Unagreed cases not going to Appeals with less than 180 days on the statute must contain both of the following:

    • Prior written notification from the Field Manager to the Manager, CPM regarding the pending submission of the case and proof of timely solicitation of consent to extend the statute of limitations. The Field Manager will hand carry, use overnight mail or use an express delivery service that can be tracked to ship the case. The Field Manager will follow up to ensure the case is received timely.

    • A memo or other documentation with the signature and concurrence of the Field Operations Manager attesting to knowledge of the facts that occurred during the examination which resulted in the short statute situation.

  4. Although Appeals requires six months (180 days) remaining on the statute to accept the case into the Appeals process (IRM 8.21.2.3), both CPM and the GE Closing Unit need sufficient time for processing. Therefore, Appeals cases should be closed to CPM following the same guidelines as unagreed cases not going to Appeals, needing at least 270 days remaining on the statute.

4.90.10.3.3  (12-06-2013)
All Other Cases

  1. All other cases closed to CPM or the GE Closing Unit, including deletion requests (Forms 10904), must have at least 180 days remaining on the statute of limitations. There may be instances when it will be necessary to close cases with less than the required processing time-frames; however, these instances should be kept to a minimum.

  2. Closure of any case, including a deletion request (Form 10904), to CPM with less than 180 days remaining on the statute will require advance managerial notification ranging from Field Manager up to and including the Director, FSLG and the Director, Government Entities as follows:

    • 120 to 179 days - a telephone call and follow-up e-mail notification to the receiving manager (or designee) prior to transferring the case on RCCMS/AIMS. The Field Manager will hand carry, use overnight mail, or use an express delivery service that can be tracked to ship the case. The Field Manager will follow up to ensure the case is received timely.

    • 61 to 119 days - a telephone call and follow-up e-mail notification to the receiving manager (or designee) with a copy to the Field Operations Manager and the Manager, CPM. The Field Manager must indicate whether or not an assessment is to be made. The Field Manager will hand carry, use overnight mail, or use an express delivery service that can be tracked to ship the case. The Field Manager will follow up to ensure the case is received timely.

    • 60 days or less - a telephone call and follow-up e-mail to the receiving manager (or designee), with copies to the FSLG Director, the Field Operations Manager, and the Manager, CPM. Also, the e-mail will be sent to Director, Government Entities. The Field Manager must indicate whether or not an assessment is to be made. The Manager, CPM and Field Manager will be responsible for monitoring the case to AIMS closure to ensure assessments are completed timely. The Field Manager will hand carry, use overnight mail or use an express delivery service that can be tracked to ship the case. The Field Manager will follow up to ensure the case is received timely.

4.90.10.4  (10-01-2010)
Procedures for AIMS Table 4.0

  1. AIMS Table 4.0, Returns with Statute Date Pending, is a computer generated listing from AIMS data showing returns in all status codes where an examination is charged to an examination group on AIMS and:

    1. the statute date has expired;

    2. the statute date is due to expire within 210 days or less; or

    3. the statute is extended due to special characteristics (e.g., claims, nonfiled return, etc.).

  2. The AIMS Coordinator is responsible for receiving, distributing and following up on Table 4.0. Each month the FSLG AIMS Coordinator will forward AIMS Table 4.0 to all groups (including CPM). The responsibility for this report rests with the Field Manager in collaboration with the Management Assistant and Field Specialist.

4.90.10.4.1  (10-01-2010)
Field Managers

  1. Upon receipt of Table 4.0, the listed cases will be checked against group statute control files and the returns or other return information, such as BMFOL or TXMOD, to ensure the current statute expiration dates are reflected on the table. When necessary, the statute controls will be updated on RCCMS to reflect the correct statute expiration date. The table will otherwise be used as a check to ensure that proper statute control actions are taken. Actions needed will be taken immediately and resultant RCCMS/AIMS update actions made.

  2. The following instructions are provided for processing the Table 4.0. To work the table correctly, the Field Manager must ensure that the following steps are taken and the proper comments written next to each line item.

    1. Each return must be reviewed. If a listed return cannot be located, it is the responsibility of the Field Manager/Specialist charged with the account on the table to make every possible effort to locate the return.

    2. If the case is still in the group's inventory, write "correct" in the comment section.

    3. If the case was closed from the group, write "C" and the date closed in the comment section and furnish copies of Form 3210, receipted if possible, and/or other pertinent information. Ensure that the status code has been updated on AIMS. For cases that have been out of the group for more than 30 days, the receiving manager should be contacted to verify the group has the return.

    4. If a statute consent has been secured and updated on RCCMS/AIMS, line through the previous statute. Record updated statute in red. Provide an AMDISA print as verification.

    5. If you have solicited a statute consent extension, write "SCE" and the date requested.

    6. If the statute, organization code or status code on RCCMS/AIMS is incorrect, indicate the correct information in red. Provide an AMDISA print and/or appropriate document as verification that RCCMS/AIMS has been corrected.

  3. If there is an account on Table 4.0 where the group cannot find any documentation relating to that specific account, but information was found on a related account, provide copies of that information to the AIMS Coordinator.

  4. On accounts where the group records show the case is closed, and the case forwarded to the appropriate Review, Classification, or Processing function, annotate Table 4.0 with closing date and disposal code. A copy of the acknowledged Form 3210 should also be attached. A "No Record" (NR) answer should not be used unless the Field Manager is certain that the case was never in the group.

4.90.10.4.2  (05-31-2006)
Manager, FSLG CPM

  1. When AIMS Table 4.0 is received from the groups, it will be forwarded to the FSLG AIMS Coordinator for processing as follows:

    1. Analyze each table to ensure that proper and timely actions have been taken by the Field Manager.

    2. Research cases indicated as closed from the groups for more than five weeks, and those indicating no record, on IDRS.

       
      • If the research shows that the case is closed, annotate the Table 4.0 and take no further action.

      • If the research shows that the case is open, the Field Manager must forward copies of the group's Form 3210 to the FSLG AIMS Coordinator. These documents will be analyzed to determine whether further action is warranted.

    3. Thirty days after AIMS Table 4.0 has been distributed to the groups, the FSLG AIMS Coordinator will provide a report to the Manager, CPM who will identify any significant problems encountered and list those groups that did not return the group report.

4.90.10.5  (05-31-2006)
Expired Statute Reports

  1. The following paragraphs provide information on expired statutes.

4.90.10.5.1  (12-06-2013)
Time-Frames

  1. Within 10 days of discovery of an expired statute or assessment requiring a Statute Expiration Report, Form 3999, a preliminary Form 3999 will be completed and forwarded through the Field Operations Manager or the Manager, CPM. A final Form 3999 can be prepared as the initial report, if all of the necessary information is available and the 10 day time-frame can be met.

  2. The final Form 3999, if not submitted as the initial report, will be prepared within 60 days of the date of the preliminary report.

4.90.10.5.2  (05-31-2006)
Responsibility for Preparation of Form 3999

  1. The individual discovering the potential statute expiration is responsible for preparing the preliminary expired statute report. This does not indicate that this person was solely, if at all, responsible for the expiration of the statute. However, this person should prepare the preliminary Form 3999 and a narrative of the facts and circumstances, with a time line, leading up to the statute expiration. The narrative will be based on a review of the paper and/or electronic case file and group statute control files.

  2. The responsibility for preparation of the final Form 3999 lies with the manager of the function/area having possession of the return when the statute expired. This manager will prepare the final form because he/she is in a position to take corrective action and make recommendations to prevent recurrences.

4.90.10.5.3  (12-06-2013)
Instructions for Preparation of Form 3999

  1. Most items are self-explanatory; however, additional information may be found in IRM 25.6.23. In addition, close attention should be given to the completion of the following line items:

    Box 12: (a) Year or Period(s) Expired
    (b) Date of Statute Expiration
    (c) Amount of Deficiency or (Overassessment)
    Box 13: "Status and Location of Return at Time of Expiration." This should state the RCCMS/AIMS status code, physical location of the case file, and type of employee who had control of the case. If it is not determinable where a case was on the date of expiration, use the location of the return at date of discovery. Include mention of any reference that might indicate location and status prior to expiration.
    Box 14: "The Statute expired because of..." This section must show a chronological narrative of the status, location and types of employees controlling or affecting the physical case file since it entered the examination stream. Once this is performed, provide a summary statement referencing these facts and delineating primary and secondary factors resulting in a expired statute.
    Box 15: "Corrective action taken or recommended to prevent recurrence of statute expiration." This should state systemic or personnel changes to be made to alleviate this problem in the future. Additionally, this item should include each type of employee and each function considered responsible for the statute expiration. In the event disciplinary action is considered and recommended, it should be explained in Box 15 without identifying the responsible employee. The disciplinary action taken against the responsible employee will be the subject of a separate report.
    Signatures Required: Field Manager or Manager, CPM
    Field Operations Manager (if statute expired in a field group)
    Director, Federal State and Local Governments

4.90.10.5.4  (12-06-2013)
Preliminary Report, Form 3999

  1. In general, only Boxes 1 through 12 are completed when a preliminary report is submitted. However, if all of the facts are known at the time of discovery and the 10 day time-frame can be met then a final report can be submitted in lieu of a preliminary report. A preliminary report will include a brief narrative of how the statute expired with a time line illustration of the processing of the case leading to the statute expiration.

  2. Three copies and the original of the completed preliminary report should be distributed as follows:

    • The original to the Director, Federal State and Local Governments

    • A copy for the case file

    • A copy for the Field Manager or Manager ,CPM

    • A copy for the Field Operations Manager (if the statute expired in a field group)

4.90.10.5.5  (10-01-2010)
Final Report, Form 3999

  1. Complete all items including the following additional information:

    1. The proposed disciplinary action or the reason why no disciplinary action is warranted

    2. Any change in the facts of the case discovered subsequent to the initial report (if applicable)

    3. Narratives from other affected functions cited in the preliminary report (as applicable)

    It is mandatory that management review any decisions that could result in disciplinary action with the Labor Relations staff prior to completion of this form and notification of the employee.

4.90.10.5.6  (04-01-2007)
Distribution of Completed Final Form 3999

  1. When the final Form 3999 is completed, three copies and the original are to be distributed as follows:

    1. The original to the Director, Government Entities

    2. A copy for the case file

    3. A copy for the Director, Federal State and Local Governments

    4. A copy for the Manager, CPM, who will maintain copies for trend review

4.90.10.5.7  (05-31-2006)
Disputes

  1. The Director, Government Entities will resolve any jurisdictional disputes.


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